Before preparing Part A, answer in complete sentences these 2 questions:

1. Looking at the direct materials equations for Standard Costs and Actual Costs, is the materials

price variance favorable or unfavorable? Why?

2. Looking at the direct materials equations for Standard Costs and Actual Costs, is the materials

Problem A

Direct materials, direct labor, and factory overhead cost variance analysis

Obj. 3, 4Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 40,000 units of product were as follows:

Each unit requires 0.3 hour of direct labor.

Instructions

1. Determine (A) the direct materials price variance, direct materials quantity variance, and total direct materials cost variance; (B) the direct labor rate variance, direct labor time variance, and total direct labor cost variance; and (C) the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance.

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $6.70 per share on January 1, 2017. The remaining 20 percent of Devine’s shares also traded actively at $6.70 per share before and after Holtz’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devine’s underlying accounts except that a building with a 5-year future life was undervalued by $57,000 and a fully amortized trademark with an estimated 10-year remaining life had a $69,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $224,000.

Following are the separate financial statements for the year ending December 31, 2018:

At year-end, there were no intra-entity receivables or payables.

1. Prepare a worksheet to consolidate these two companies as of December 31, 2018.

2. Prepare a 2018 consolidated income statement for Holtz and Devine.

3. If instead the noncontrolling interest shares of Devine had traded for $4.50 surrounding Holtz’s acquisition date, what is the impact on goodwill?

On January 4, 2018, Runyan Bakery paid $324 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to excercise significant influence over Lavery's operations. Runyan chose the fair value option to account for this investment. Runyan received dividends of $2.00 per share on December 31, 2018, and Lavery reported net income of $160 million for the year ended December 31, 2018. The market value of Lavery's common stock at December 31, 2018 was $31 per share. On the purchase date, the book value of Lavery's net assets was $800 million and:

a. The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $80 million.

b. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.

Required:

1-a. Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this investment under fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securities for which there is not specific influence.

1-b Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet.

2-a Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this investment under the fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then records a fair value adjustment at the end of the year that allows it to comply with GAAP.

2-b Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $57,000 and $108,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Allocating Selling and Administrative Expenses using Activity-Based Costing

Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows:

In addition, the company incurs selling and administrative expenses of $279,440. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are:

Activity-base usage and unit volume information for the three customers is as follows:

Required:

1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

2. Determine the activity costs allocated to the three customers, using the activity rates in (1).

3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations.

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system: Inputs (1) Standard Quantity or Hours (2) Standard Price or Rate Standard Cost (1) × (2) Direct materials 2.30 pounds $ 16.30 per pound $ 37.49 Direct labor 1.00 hours $ 15.30 per hour $ 15.30 Variable manufacturing overhead 1.00 hours $ 9.20 per hour $ 9.20 Total standard cost per unit $ 61.99 Total Variances Reported Standard Cost* Price or Rate Quantity or Efficiency Direct materials $ 637,330 $ 11,919 F $ 32,600 U Direct labor $ 260,100 $ 3,600 U $ 15,300 U Variable manufacturing overhead $ 156,400 $ 4,400 F $ ?† U *Applied to Work in Process during the period. The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored. Required: 1. How many units were produced last period? 2. How many pounds of direct material were purchased and used in production? 3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.) 4. How many actual direct labor-hours were worked during the period? 5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.) 6. How much actual variable manufacturing overhead cost was incurred during the period?

As auditor for Checkem & Associates, you have been assigned to review Cullumber Corporation’s calculation of earnings per share for the current year. The controller, Mac Taylor, has supplied you with the following calculations:

Net income $3,538,109

Common shares issued and outstanding:

Beginning of year 1,374,960

End of year 1,200,000

Average 1,242,500

Earnings per share: $3,374,960/1,242,500= $2.72 per share

You have gathered the following additional information:

1. The only equity securities are the common shares.

2. There are no options or warrants outstanding to purchase common shares.

3. There are no convertible debt securities.

4. Activity in common shares during the year was as follows:

Outstanding, Jan. 1 1,285,000

Shares acquired, Oct. 1 (250,000)

1,035,000

Shares issued, Dec. 1 165,000

Outstanding, Dec. 1,200,000

Instructions

a) Based on the information, of you agree with the controllers calculation of earnings per share for the year? If disagree, provide revised calculation

b) Assume the same facts except that call options had also been issued for 140,000 common shares at $10 per share. These options were outstanding at the beginning of the year and none had been exercised or cancelled during the year. the average market price of the common shares during the year was $20 and the ending market price was $25. prepare a calculation of earnings per share.

For your main Discussion post, describe at least two typical adjusting entries a service-type business would need to record to bring account balances up-to-date. For your examples, one of the adjusting entries should be an accrual and another a deferral. You may use similar examples as those in your textbook and you may also research other typical adjusting entries for service-type companies. Be sure to address the following questions:

• What are the purposes of each of your example adjusting entries?
• Why are these adjusting entries required?
• What if the company does not record these adjusting entries? Would financial statements be accurate? Why or why not?
• Should the adjusting entries described be posted to the general ledger before preparing an adjusted trial balance? Why or why not?

Overview: Advances in technology have impacted many facets of the auditing process, from assessing risk and internal control to conducting substantive procedures. These changes both create challenges and offer opportunities for auditing professionals. Prompt: For this short paper, you will use the internet to research the impact of a specific technology on auditing. You will provide a description of the technology, an explanation of its current and potential future impact on auditing, and a suggestion of how auditing and auditors can better adapt to the changes brought about by the technology. Use the resources provided in this module for help choosing and researching a topic. Specifically, the following critical elements must be addressed:  Technology Description: Provide a brief description of the technology you chose.  Impact on Auditing: Provide an explanation of the current impact of the technology on auditing and its potential future impact. Support your analysis with research.  Suggestions for Adapting: Provide suggestions for how auditors can better adapt to the changes brought about by the technology. If the technology you chose creates challenges for the profession, make suggestions for how auditors can adapt to meet these challenges. If the technology offers opportunities for the profession, make suggestions on how auditors can better adapt to take advantage of these opportunities. Support your suggestions with research.

4) Cost per equivalent unit of direct materials and conversion

Problem 1: During the month, EKM Enterprise purchased $100,000 in raw material on account, used $150,000 in direct labor hours, and used $100,000 in direct raw materials. EKM Enterprise applies overhead at a rate of 200% of direct labor. No products were finished during the period. Prepare the necessary journal entries including the purchase of raw materials.

Brent Robertson and his banker were reviewing the quarterly income statements for his consulting business, Robertson and Associates, Inc. The banker was impressed with the growth of sales revenue and net income for the second quarter of this year compared with the second quarter of last year. Brent knew it had been a good quarter, but he didn't think it had been spectacular. Suddenly, Brent realized that he failed to close out the revenue and expense accounts for the prior quarter, which ended in March. Because those temporary accounts were not closed out, their balances were included in the second quarter amounts for the current year. Brent then realized that the banker had the financial statements but not the general ledger or any trial bal- ances. Thus, the banker would not be able to see that the accounting cycle from the first quarter was not properly closed and that this failure was creating a misstated income statement for the second quarter of the current year. The banker then commented that the business seemed to be performing so well that he would approve a line of credit for the business. Brent decided to not say anything because he did not want to lose the line of credit. Besides, he thought, it really did not matter that the income statement was misstated because his business would be sure to repay any amounts borrowed.

Should Brent have informed the banker of the mistake made? should he have redone the second quarter's income statement ? was Brent's failure to close the prior quarter's revenue and expense accounts unethical? Does the fact that the business will repay the loan matter?

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 285 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 10 are from beginning inventory.

Required:

1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,700, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

You have been asked to assess the organisation’s compliance with statutory requirements. This is outside of your scope of operation. The requirements are that you examine current policies and practice, assess compliance and make recommendations for improvement. With whom might you consult and what information/ assistance might you need? 60–100 words

(Please note: Australian Tax)

partial income statements for Sherwood company summarized for a four year period show the following

2015    2016 2017 2018

net sales    2,200.000    2,600.000    2,700.000 3,200.000

cost of goods sold    1,496.000    1,742.000    1,863.000 2,176.000

gross profit 704.000 858.000 837.000 1,024.000

an audit reveled that in determining these amounts, the ending inventory for 2016 was overstated by $22,000. the inventory balance on December 31, 2017. was accurately stated. the company uses a periodic inventory system

1\ restate the partial income statements to reflect the correct amounts after fixing the inventory error

2\ compute the gross profit percentage for each year (a) before the correction and (b) after the correction

2.a\ does the pattern of gross profit percentage lend confidence to your corrected amount